CalPERS Puts ‘Laser-Like Focus’ on ESG, Board Diversity, and Executive Pay
As a large, global investor, CalPERS votes its proxies to influence public companies on important topics. At the top of the list: issues around climate change, board diversity, and executive pay. From an investment perspective, each one of these issues can impact a company’s performance and investment returns. These returns help distribute wealth, and in the case of CalPERS, help pay pensions and provide retirement security to more than 2 million members. This article by Randy Diamond in Pensions & Investments highlights why these issues have risen to the top of CalPERS’ list.
For example, CalPERS views climate change as a risk to companies. Disasters such as wildfires and floods have major economic impacts. It is through this understanding that CalPERS works with companies to encourage them to incorporate changes to lower their emissions and reduce their impact on the environment.
In the case of board diversity, CalPERS believes that companies that lack diversity on their corporate board can fall into “group-think.” This situation, which can result in a company not hearing opposing views and lacking a well-rounded perspective, can leave the company in a vulnerable position
On executive pay, CalPERS advocates for “Pay for Performance.” This means that executives at companies that are underperforming should not be paid disproportionally well as their company struggles. This not good for shareowners and leads to large pay gaps within the company.